1983 (9) TMI 264 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Classification of speedometers as either "automobile spare parts" or "accessories" under the Tamil Nadu General Sales Tax Act, 1959.
2. Applicability of the reduced tax rate of 13% versus the standard rate of 15% for speedometers sold by the petitioners.

Detailed Analysis:

Issue 1: Classification of Speedometers
The core issue was whether speedometers should be classified as "automobile spare parts" or "accessories." The petitioners argued that speedometers should be considered spare parts, citing Notification No. 86 of 1970, which reduced the tax rate to 13% for automobile spare parts. They relied on the clarification issued by the Board of Revenue (Commercial Taxes), Madras, and several judicial decisions, including Commissioner, Sales Tax v. Kohinoor India Pvt. Ltd. [1980] 45 STC 332 and others, to support their contention.

On the other hand, the department contended that speedometers are not included in the expression "automobile spare parts" in the notification and should be classified as accessories. They argued that a speedometer is not essential for the operation of an automobile, although it adds to the convenience or effectiveness of the vehicle.

The court examined item 3 of the First Schedule to the Act, which levies a 15% tax on parts and accessories of motor vehicles. The notification reduced the tax rate to 13% for automobile spare parts but did not explicitly include speedometers. The court concluded that a speedometer is a device that indicates the speed of a vehicle, which is not an integral, essential, or indispensable part of the vehicle. The court noted that a vehicle can operate without a speedometer, unlike tyres or batteries, which are essential.

The court found that the language of the notification and the inclusion of essential items like batteries and tyres indicated that "automobile spare parts" referred to vital and indispensable parts of the vehicle. Therefore, the court held that a speedometer is an accessory and not a spare part.

Issue 2: Applicability of Reduced Tax Rate
The petitioners sought the benefit of the reduced tax rate of 13%, arguing that speedometers should fall within the scope of "automobile spare parts" as per the notification. They cited various judicial decisions to support their claim.

However, the court referred to several decisions, including State of Uttar Pradesh v. Kores (India) Ltd. [1977] 39 STC 8 (SC) and N.A.V. Naidu v. Commissioner of Commercial Taxes, Bangalore [1970] 25 STC 381, which helped clarify the distinction between accessories and spare parts. The court observed that even though vehicles are sold with speedometers, they are not essential parts of the vehicle, similar to how typewriter ribbons are considered accessories and not parts of typewriters.

The court also referred to Annapurna Carbon Industries Co. v. State of Andhra Pradesh [1976] 37 STC 378 (SC), which explained that accessories are supplementary devices that add to the convenience or effectiveness of the main machinery but are not essential.

Based on these observations, the court concluded that speedometers are accessories and not spare parts. Therefore, the sales turnover of speedometers should be assessed at the standard tax rate of 15%, not the reduced rate of 13%.

Conclusion
The court upheld the classification of speedometers as accessories rather than automobile spare parts. Consequently, the petitioners' sales turnover of speedometers should be taxed at 15%, as per the standard rate, and not at the reduced rate of 13%. The tax revision case was dismissed, with no order as to costs.